Lightrock, the impact investing offshoot of LGT Group, has invested in Selina, a provider of home equity lines of credit for the UK public. Selina provides credit facilities to UK homeowners secured against equity in their homes.
“Selina is creating a positive impact by providing cheaper financing and the flexibility of financing,” Ashish Puri, growth investor and deal lead at Lightrock, told New Private Markets. “And it creates responsible usage because [the loan] is tied to your home. You aren’t going to spend it without thinking about how you pay it back.”
Lightrock is the lead investor in the $35 million equity portion of Selina’s $150 million Series B funding round, the firm told TechCrunch. The deal is from Lightrock’s Growth Fund I, which closed in July 2021 with $900 million. Half of the capital for this fund came from LGT Group, a banking group founded by the royal family of Lichtenstein, and half from LGT’s private banking clients.
Selina offers borrowers an alternative to traditional loans such as mortgages, short-term loans, bank loans and credit cards, Puri said. “If you were to remortgage your property, you would be locked into a 10-to-20-year mortgage. There are charges and fees if you pay it back early. With Selina, you can pay it back over a few months or 10 years. An overdraft on a credit card is north of 25 to 30 percent APR. The current APR with Selina is around 6 percent.”
UK high street banks offer loans of £10,000 ($13,550; €11,850) with interest rates between 2.8 and 3.1 percent APR for a five-year repayment period, research by consumer advice provider Which? shows. Asked how Selina provides more value to borrowers than high street bank loans, Puri said: “A high street bank does not provide the same flexibility, and they include charges on top. Banks want to know what you are borrowing for. And the paperwork – it’s very hard to get a loan. Selina can provide financing in under 24 hours. And Selina can provide financing for any reason, under certain clauses.”
Fifty percent of Selina’s financing is used by borrowers for energy efficiency home improvements – thereby reducing fuel consumption – and 25 percent is used for school and higher education costs, said Puri, although Selina does not have lending targets for any specific use.
Another way Selina can help people is with credit card debt consolidation. “People can pay a fraction of what they’re paying on their existing credit card,” Puri said. But there is nothing stopping borrowers from using credit cards irresponsibly and then drawing a Selina credit facility to repay credit card debts at a lower APR.
“Yes, it’s possible. That’s not under our control,” Puri said. “We’re just trying to make their lives easier and simpler. And it encourages good behaviour because it is linked to your house, so there is a way that financial education is provided.”
Lightrock invests in growth technology along three impact themes: people, planet and productivity. The firm implements impact management systems for investment decision-making, reporting and impact value creation processes, leveraging frameworks such as the Impact Management Project and GIIN’s IRIS+, said Katharina Sommerrock, head of investor relations at the firm. These were independently assessed by impact verification provider BlueMark and Lightrock received an ‘above average’ result, said Sommerrock.